The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin, German Federal Financial Supervisory Authority) is gradually raising the sectoral systemic risk buffer for certain exposures arising from Austrian commercial real estate financing. The general administrative order issued on 21 October 2026 bears the reference number ISRI 5-QA 2103/00002#00006.
When the order enters into force, the buffer rate for the covered exposures will initially rise from 1.0% to 2.0%. A further increase to 3.5% will follow on 1 July 2027. The rules apply to institutions authorised in Germany if their relevant Austrian exposures reach the stipulated materiality threshold.
Reciprocal Recognition of Austrian Capital Requirements
Response to the Decision of the Austrian Financial Market Authority
The adjustment is based on a decision by the Austrian Finanzmarktaufsicht (FMA, Financial Market Authority) to increase the capital requirements for certain credit risks in the commercial real estate sector. Through reciprocal application, BaFin is extending these requirements, subject to the stipulated conditions, to affected institutions in Germany.
Cross-border recognition is intended to prevent comparable exposures from being subject to different capital requirements depending on where the lending institution is established. At the same time, it limits the possibility of shifting covered risks to lenders that would otherwise be subject to less stringent requirements.
Legal Basis of the General Administrative Order
The recognition is based on § 10e Absatz 9 Satz 2 Kreditwesengesetz (KWG, German Banking Act). This provision is based on Art. 133 and Art. 134 of Directive 2013/36/EU.
A sectoral systemic risk buffer requires the institutions concerned to maintain additional Common Equity Tier 1 capital for certain exposures. Unlike general capital requirements, this instrument specifically targets individual areas of risk. In the present case, it concerns certain credit risks relating to the Austrian commercial real estate sector.
The buffer rate does not constitute a direct surcharge on lending rates. The increase to 3.5% therefore does not mean that the interest rate on an affected real estate loan will rise by 3.5 percentage points.
Phased Introduction of the Higher Buffer Rates
First Stage Applies When the Order Enters into Force
For application in Germany, a distinction must be made between the two stages of the increase:
- The increase from 1.0% to 2.0% applies when the general administrative order enters into force.
- The further increase to 3.5% will take effect on 1 July 2027.
In Austria, the rate of 2.0% had already applied since 1 July 2026. In a notification dated 20 March 2026, the FMA informed the European Systemic Risk Board (ESRB) that the buffer was to be set at 2.0% at that time and increased to 3.5% on 1 July 2027. Reciprocal application of the first stage of the increase in Germany therefore begins later than the corresponding Austrian rules.
Basis for the Austrian Determination
The Austrian buffer rates are based on Recommendation FMSG/6/2024 of the Finanzmarktstabilitätsgremium (FMSG, Austrian Financial Market Stability Board) dated 3 October 2024, an expert opinion from the Oesterreichische Nationalbank (OeNB, Austrian National Bank), and the amendment of 23 June 2026 to the Austrian Kapitalpuffer-Verordnung (Capital Buffer Regulation). These were supplemented by the ESRB’s favourable assessment designated ESRB/2026/1 and a supportive opinion from the European Banking Authority.
In a notification submitted to the ESRB on 20 May 2025, the FMA had already stated that the Oesterreichische Nationalbank considered a buffer of 3.5% of risk-weighted commercial real estate exposures to be appropriate. The initial limitation to 1.0% was due to uncertainties regarding the data on exposures and the capital requirements under CRR III.
The calibration was based, among other things, on a stress analysis conducted by the Oesterreichische Nationalbank. According to the results cited by BaFin, the simulated probabilities of default and loss rates reached levels comparable to those recorded during the real estate crises in the United States, Spain and Ireland in 2007 and 2008.
Covered Exposures and Materiality Threshold
Certain Exposures to Non-Financial Corporations
The buffer does not cover all real estate financing relating to Austria. It includes certain exposures to non-financial corporations. Non-profit housing associations are exempt.
The relevant economic sectors are determined on the basis of Regulation (EC) No 1893/2006. They include, among others, the construction of buildings under NACE code F 41, as well as demolition and site preparation, electrical, plumbing and other construction installation activities, and building completion and finishing.
Threshold of EUR 100 Million
The amended general administrative order applies to institutions authorised in Germany whose relevant Austrian exposures reach a threshold of EUR 100 million. This materiality threshold must be applied on an individual, sub-consolidated and consolidated basis.
The threshold relates to the relevant exposures and not to an institution’s total lending volume. Institutions that do not hold any corresponding exposures or do not reach the threshold are not subject to this additional requirement solely because they are authorised in Germany.
The specific capital impact depends on the volume and regulatory treatment of the relevant exposures. The threshold of EUR 100 million must therefore not automatically be equated with the risk-weighted exposure amount.
Consultation Procedure Prior to the Issuance of the Order
Comments on Reciprocal Application
BaFin’s issuance of the general administrative order was preceded by a consultation procedure that ran from 14 to 28 September 2026. One response referred to criticisms that had already been raised during the procedure concerning the order of 25 February 2026 against recognising the buffer in principle.
During the first consultation procedure in 2026, the banking industry had specifically called for the materiality threshold to be raised to EUR 500 million, a longer implementation period and more precise definitions. The proportionality of the measure had also been questioned in view of the limited number of institutions affected. Nevertheless, in its general administrative order of 21 October 2026, BaFin retained the threshold of EUR 100 million and implemented the higher buffer rates on a reciprocal basis.
Objection to the General Administrative Order
An objection to the general administrative order may be lodged with BaFin in Bonn or Frankfurt am Main within one month of its notification. Notification is effected by public announcement and is deemed to have taken place on the day after publication.
Potential Indirect Significance for Financing
Higher capital requirements may affect how the institutions concerned assess the economics of individual lending transactions. Whether lenders consequently modify their terms, collateral requirements or assessments of economic viability will, however, depend on the capital resources of the institution concerned, the specific exposures and market conditions.
The general administrative order neither prescribes higher lending rates nor restricts lending. Private banking customers in Germany are also not directly affected by the rules because they concern certain commercial real estate credit risks in Austria and the capital resources of the covered institutions.
A study by the Österreichisches Institut für Wirtschaftsforschung (WIFO, Austrian Institute of Economic Research) from June 2026 assumed that an interest-rate surcharge of seven basis points would result in a decline in construction investment of approximately 1%, thereby finding a greater impact than the regulatory impact assessment. According to the FMA, the non-performing loan ratio for Austrian commercial real estate reached approximately 8.3% in 2025, marking a record high.
Assessment from a Banking Law Perspective
The phased increase is particularly relevant to the regulatory capital planning of German institutions with significant exposures to the Austrian commercial real estate sector. For credit institutions, investors and companies seeking financing, this may raise questions regarding the scope of the general administrative order, the classification of individual exposures and the impact on existing or planned financing arrangements.
MTR Legal Rechtsanwälte advises companies, investors and high-net-worth private individuals on banking law matters relating to financing and regulatory requirements. Further information is available under Legal Advice on Banking Law.
